Money managers are searching for the next big winners in Asia’s technology sector as concerns about overvalued stocks and changing market conditions force a rethink of AI investments.
The stock boom triggered by ChatGPT’s debut is now in its fourth year, but major players like Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. are losing steam. Investors are now eyeing smaller companies such as MediaTek Inc. and Zhongji Innolight Co. instead.
Analysts say the big names that supply critical AI components will likely recover after their recent pullbacks. But the spotlight is moving as the industry shifts focus from building large language models to practical uses of the technology and cutting costs.
The shake-up started last month when Alphabet Inc. released an improved Gemini model and struck deals with other companies for its own AI chips. Amazon.com Inc.’s newest accelerator added to the momentum away from trades focused on OpenAI and chip giant Nvidia Corp.
Japan’s SoftBank Group Corp., viewed as closely linked to OpenAI, saw its shares drop 38% in November, marking its worst month in 25 years. As reported by Cryptopolitan previously, TSMC fell 2% and SK Hynix fell 8% last month, cooling off after big gains.
ChatGPT now faces growing competition, while Nvidia’s training chips are getting less attention as application-specific circuits gain importance. This has investors worried about price pressures.
If large language models become common products, “the ones with cheaper costs will become the winner,” said Han Sangkyoon, chief investment officer at Quad Investment Management in Seoul. He thinks the next six months will determine “how the bubble created by Nvidia and OpenAI could burst.”
New winners emerge in Asian markets
Instead of leaving the AI trade entirely, investors are picking different stocks. Taiwan’s MediaTek, a chip designer partnering with Alphabet, posted its strongest week since 2002 after the Gemini launch. South Korea’s IsuPetasys Co., which makes circuit boards for Alphabet, jumped 18% to a record high last week.
These moves show that Asian suppliers can profit regardless of which American tech giant leads the supply chain.
“Around 90% of the hardware manufactured globally, which is fitting into data centers, servers, testing environment, anything you need from manufacturing the chips, memory cards, or even testing, cooling systems, all comes from Taiwan, Korea, Japan, Thailand, and even mainland China,” said Egon Vavrek, head of emerging markets and Asia equities at BlackRock Inc.
Despite the AI competition between the US and China, their supply chains remain connected. Zhongji, an optical transceiver maker based in Shandong, gets 22% of its revenue from Alphabet and 11% from Amazon. Its shares climbed 11% last week to a new high.
Established leaders maintain strong positions
The established leaders aren’t finished yet. TSMC has the best chipmaking technology and manufactures for all major players. Its shares are headed for a third straight year of gains, pushing its value above $1 trillion.
SK Hynix and Samsung Electronics Co. control over 90% of the global market for high-bandwidth memory, another key AI component, according to Macquarie Group Ltd. research.
SK Hynix shares have more than tripled this year, and negative bets against the stock have decreased. Short interest dropped to 0.6% of free float from over 3% in May, based on S&P Global Inc. data seen by Bloomberg.
But investors keep hunting for fresh ideas, driven by news, worries about expensive stocks, or limits on what they can hold.
“AI remains front and center of tech investors’ minds, even after three years into the theme,” said Timothy Fung, head of Asia equity strategy at JPMorgan Private Bank in Hong Kong. “Opportunities are evolving across the AI supply chain, but remain linked to physical infrastructure.”
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